U.S.’s Massive debt crisis!!!

Finally, someone in Washington DC is taking a sensible approach to the U.S.’s massive debt and deficit crisis: President Obama.

The Republicans continue to stick to their ludicrous plan to fix our fiscal problems by slashing spending immediately and raising no additional revenue. Over the long haul, spending does need to be cut, but slashing it suddenly will deliver a hammer blow to an already frail economy. The country will plunge back into recession, unemployment will soar, and–importantly from a budget perspective–government revenues will drop. The latter outcome, which we’re seeing in Greece, the UK, and other countries that have tried “austerity” as a solution, will defeat the whole purpose of trying to balance the budget by cutting spending. Translation: It won’t work.

But the Democrats’ “plan” is no better. The Democrats plan appears to be to ignore the crisis, keep their heads stuffed deep in the sand with respect to Medicare, Social Security, and other spending programs that are bankrupting the country, and jack up taxes only on “the rich.” The latter element will have to be part of the solution to our woes, but it won’t solve the problem. Spending is going to have to be cut, and taxes are likely going to have to rise for everyone.

But, at last, someone we sent to Washington to solve our problems is actually putting forth a plan that makes sense.

According to the Washington Post, President Obama is going to meet with leaders of both parties this morning and advocate a new, long-term approach to the budget crisis, one that goes straight up the middle.

Specifically, says the Post, the President’s plan calls for:

Cuts in Medicare spending

Social Security reform (presumably raising the eligibility ages)

Increases in revenue (read: higher taxes)

The White House says the new plan will save $4 trillion over the next decade, instead of the $2 trillion in savings estimated from a prior plan. (Take both of these estimates–and any other stimates you hear about any plan from either party–with a huge grain of salt. Such “savings” are usually based on ridiculously optimistic assumptions.)

Most importantly, this plan would be enactedover the course of the next decade.

The most dangerous part of the current game of chicken with respect to the deficit is the emphasis on short-term Band-Aids instead of long-term solutions. Although the US’s deficit is massive, one or two years won’t make much difference over the long haul. Radically cutting spending or jacking up taxes to go “cold turkey” on the problem, meanwhile, will likely clobber the economy and make the situation even worse.

A more intelligent approach is for both sides to acknowledge the problem and then come up with a long-term middle-of-the-road plan for dealing with it–one that combines both spending cuts and tax increases.

President Obama appears to be (finally) doing that.

Now let’s hope everyone else we sent to Washington to fix our problems stops shilling for their party platforms and putting the country’s credibility on the line to further their own careers. Let’s hope that, instead, they actually try to fix something.